Process: 357/2015-T

Date: November 3, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 357/2015-T addressed the application of Stamp Tax (Imposto do Selo) under Verba 28.1 of the General Table of Stamp Tax (TGIS) to building land owned by a housing cooperative. The claimant, a housing cooperative, challenged three stamp tax assessments totaling approximately €44,350 for the years 2013 and 2014. The cooperative raised two main legal arguments: first, that it qualified for a subjective exemption from stamp tax under Article 66-A(12) of the Tax Benefits Statute (TBS), which grants cooperatives exemption from stamp tax on all acts, contracts, documents, and titles. The cooperative argued that Article 7(6) of the Stamp Tax Code, which references Article 44 TBS exemptions for Verba 28 situations, does not exclude other exemptions such as those granted to cooperatives. Second, the cooperative contended that the taxed properties were 'building land' (terrenos para construção) rather than 'properties with residential use,' and that Verba 28.1 TGIS, as worded by Law 55-A/2012 of 29 October, only taxed properties with residential use. The Tax Authority countered by arguing that only the specific exemptions listed in Article 44 TBS apply to Verba 28.1 taxation. Additionally, the AT raised a procedural exception regarding the timeliness of the 2013 assessment challenge, arguing that the 90-day deadline for filing an arbitration request under Article 10 LRTA and Article 102 TPPC had expired, as the voluntary payment deadline was 30 November 2013 and the request was filed on 4 June 2015. The arbitral tribunal, constituted on 12 August 2015 with arbitrator Raquel Franco, held a hearing on 15 October 2015 where parties waived written arguments. This case highlights key interpretive issues regarding cooperative tax exemptions and the scope of Verba 28.1 TGIS application to different categories of real estate.

Full Decision

Arbitral Decision

The Arbitrator Raquel Franco, appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the sole arbitral tribunal constituted on 12 August 2015, decides as follows:

I. REPORT

  1. On 17.03.2015, "A…, CRL", with Tax Identification Number (NIPC) …, filed a request for constitution of a sole arbitral tribunal, pursuant to Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime of Tax Arbitration, hereinafter "LRTA"), with the Tax and Customs Authority (AT) being the respondent.

  2. The request for constitution of the Arbitral Tribunal was accepted by the Honourable President of CAAD and automatically notified to the AT on 15.06.2015.

  3. Pursuant to paragraph a) of Article 6(2) and paragraph b) of Article 11(1) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the sole arbitral tribunal, who communicated acceptance of the corresponding appointment within the applicable period.

  4. On 15.06.2015, the parties were duly notified of this appointment and did not manifest any intention to refuse the appointment of the arbitrator pursuant to the combined provision of Article 11(1), paragraphs a) and b) of the LRTA and Articles 6 and 7 of the Deontological Code.

  5. Thus, pursuant to paragraph c) of Article 11(1) of Decree-Law No. 10/2011, of 20 January, as amended by Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 12.08.2015.

  6. On 15.10.2015, the meeting provided for in Article 18 of the LRTA took place. The Claimant began by responding to the exception invoked by the Respondent. Subsequently, the tribunal heard the parties regarding the matter of submission of written arguments, and, as they declared they waived the submission thereof, the tribunal granted the request.

  7. The tribunal further communicated that the date for delivery of the arbitral decision would be 16.11.2015.

  8. In the present proceedings, the Claimant seeks that the Arbitral Tribunal declare the illegality of the following acts of assessment of stamp tax under item 28.1 of the General Table of Stamp Tax (GTST):

  • Assessment No. 2013/…, in the amount of € 11,015.80, relating to the year 2013 and to the property with matriculation article … of the parish of … and article … of the current Union of Parishes of … (… and …) of the same municipality;

  • Assessment No. 2015…, dated 20.03.2015, in the amount of € 11,594.13, relating to the year 2014 and to the property with matriculation article … of the parish of … and article … of the current Union of Parishes of … (… and …) of the same municipality;

  • Assessment No. 2015…, dated 21.03.2015, in the amount of € 21,740.93, relating to the year 2014 and to the property corresponding to article … of the Parish and Municipality of ….

8.A. The Claimant supports its request, in summary, in the following terms:

The Claimant is a housing cooperative, which has as its main purpose the construction, promotion and acquisition of dwellings for the housing of its members, as set forth in the permanent certificate with access code …-…-….

The Claimant is exempt from stamp tax by virtue of being a housing and construction cooperative, under Article 66-A of the Tax Benefits Statute (TBS), whose Article 12 provides that "cooperatives are exempt from stamp tax on acts, contracts, documents, titles and other facts, including gratuitous transfers of assets, when such tax is their charge."

Such provision derives from the constitutional imperative to stimulate and support cooperative activities, namely through the granting of tax benefits (Articles 85(1) and (2) of the Constitution).

The Tax Authority's argument that only the exemptions established in Article 44 of the TBS would be applicable to item 28 of the GTST finds no correspondence either in the spirit or in the letter of the law.

Article 7(6) of the Stamp Tax Code (STC) provides that "the exemptions provided for in Article 44 of the Tax Benefits Statute are still applicable to the situations provided for in item No. 28 of the General Table."

The exemptions referred to in Article 7 of the STC relate to certain categories of acts and concrete situations, such as premiums, guarantees, interest, financial operations, loans, among others.

For its part, Article 66-A of the TBS contemplates the benefits to cooperatives and among the various exemptions it establishes is, in its Article 12, the exemption from stamp tax.

It is an exemption from stamp tax that does not depend on the category of acts or situations from which it derives, as is the case in several instances provided for in Article 44 of the TBS, constituting a subjective exemption, applicable to cooperatives, in relation to all acts, contracts, documents, titles and any other facts in which stamp tax is incurred.

The legislative intent underlying the provision of Article 7(6) of the STC is to extend to the situations covered by Article 44 of the TBS, which contemplates only the exemption from real estate tax (IMI), the exemption of item No. 28.

From Article 7(6) of the STC it does not follow that only the exemptions of Article 44 of the TBS subsist: the use of the adverb "still" evidences that other exemptions subsist – such is the case of the exemption provided for in Article 66-A(12) of the TBS, which concerns specifically stamp tax. If the legislative intent were to withdraw the exemption from stamp tax with respect to item No. 28 of the Table, it could not fail to establish this restriction in the proper place, that is, in the same Article 66-A. Having not done so, it is manifest that what was intended was to maintain what was already provided for in law and thus it was maintained.

Nor would it make sense to maintain the exemption in general for cooperatives and exclude such exemption only for item 28.

On the other hand, it also would not make sense that the entities referred to in Article 44 of the TBS would be exempt from the incidence of the tax while the exemption of cooperatives was being eliminated.

The Claimant further supports its request on the argument that the properties on which the taxation falls are land for construction, which would have been excluded, in the periods in question, from the incidence of taxation by way of item 28.1 of the GTST, inasmuch as it provided, in the wording given to it by Law No. 55-A/2012, of 29 October, for the taxation of properties with residential use.

Now, resulting from Article 6 of the Real Estate Tax Code (RETC) a clear distinction between urban properties with "residential use" and "land for construction," these cannot be considered, for purposes of incidence of stamp tax, as "properties with residential use."

8.B. In its Answer, the AT invoked, briefly, the following:

8.B.1 On the Exception

The Claimant identifies as one of the tax acts subject to the request for arbitral pronouncement the assessment No. 2013…, in the amount of € 11,015.80, relating to the year 2013.

The object of the request for arbitral pronouncement are the "… acts of assessment of Stamp Tax, Item 28.1".

Article 10 of the LRTA provides, as to acts of assessment/self-assessment, that the period for presenting the request for arbitral pronouncement is 90 (ninety) days, referring, as to the moment of beginning the counting, to what is provided for in Article 102(1) and (2) of the Tax Procedure and Process Code (TPPC).

The stipulated period of 90 days would have as its starting point the day following the end of the period for voluntary payment of the tax debt – cf. Article 102(1), paragraph a) of the TPPC.

Having regard to Article 85(2) of the TPPC, the deadline for payment of the tax at issue occurred on 30-11-2013 (cf. Annex I to p. 5 of the Administrative File), so that, having the request for constitution of the arbitral tribunal been presented on 04.06.2015, it is untimely and the tribunal cannot take cognizance thereof.

Indeed, having exceeded the period for direct challenge (that is, of the primary act), the "timeliness" of the request could only be based on the existence of some means of administrative challenge of the assessment act where a decision denying/dismissing, wholly or in part, the claims formulated therein by the tax debtor had been rendered (which would constitute an act of second degree).

The Claimant herein administratively challenged the tax assessment act; the Tax Administration denied/rejected the revision of the act in the dimension requested of it.

However, notwithstanding having made allusion and identified these circumstances, the Claimant did not formulate/specify to the Tribunal any request tending toward the annulment of what was decided in that proceeding.

Having not done so, there is no support that could establish the timeliness of the request and, consequently, the possibility of the Tribunal considering the request formulated with respect to the assessment act.

8.B.2 As to the merits of the request, the AT invokes the following arguments:

The controversy at issue in the present proceedings results from the alterations introduced by Law No. 55-A/2012, namely, the creation of item 28 of the GTST annexed to its respective Code and its application or non-application to cooperatives.

As to the objective scope of application, Article 1(1) of the STC currently provides, in the wording given by Law No. 55-A/2012, of 29 October, that: "Stamp tax applies to all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the General Table, including gratuitous transfers of assets."

In the GTST, specifically in Item 28, we find defined the rate (by virtue of Article 22(1), STC) that applies to ownership, usufruct or right of superficies of urban properties whose patrimonial value for tax purposes contained in the register, pursuant to the Real Estate Tax Code (RETC), equals or exceeds € 1,000,000.00.

Prior to the alterations made by Law No. 55-A/2012, Article 1(1) of the STC did not include in its provision "legal situations" and the GTST was limited to Item 27.

Furthermore, as to the subjective scope of application, with Law No. 55-A/2012 was also added Article 2(4), establishing therein that in the situations provided for in item No. 28 of the General Table, the tax subjects are those referred to in Article 8 of the RETC:

"1 - The tax is due by the owner of the property on 31 December of the year to which it relates.

2 - In cases of usufruct or right of superficies, the tax is due by the usufructuary or by the superficiary after the commencement of construction of the work or the end of planting.

3 - In the case of resolvable property, the tax is due by the person having the use and enjoyment of the property.

4 - It is presumed for tax purposes that the owner, usufructuary or superficiary is the person who figures or should figure in the register on the date referred to in No. 1 or, in the absence of registration, the person who on that date has possession of the property.

5 - In the situation provided for in Article 81°, the tax is due by the undivided estate represented by the head of household."

As to the burden of the tax, as a result of the introduction of Item 28, there was introduced paragraph u) of Article 3(3) of the STC, which identifies the holder of the economic interest, in this case, the tax subject referred to in Article 8 of the RETC, by virtue of Article 2(4) of the STC.

Law No. 55-A/2012, of 29 October, also added Article 7(6) of the STC, pursuant to which "The exemptions provided for in Article 44 of the Tax Benefits Statute are still applicable to the situations provided for in item No. 28 of the General Table."

Following Law No. 55-A/2012, the legislator, in Law No. 66-B/2012, specifically through Article 218, came, regarding the TBS, to amend only the wording of Articles 22, 48, 58, 66-B, 69 and 71 of the TBS and in Article 219 of the said statute came to repeal Article 72 of the TBS, that is, did not legislate on Articles 44 (referring to exemptions regarding immovable property) and 66-A (which regulates the TBS in its aspect of application to Cooperatives).

The regime created through Law No. 64-B/2011, of 30 December, and embodied in the novel Article 66-A of the TBS expanded the universe of exemptions from which cooperatives benefited - the "closed list" that had been established in the provision, subsequently repealed, regarding the acts considered exempt ceased to exist. The legislator not only expanded one of the exempt classes, that of "acts," but created a new class, that of exempt "facts."

However, the expansion of exemptions operated by Law No. 64-B/2011 did not have, as seen, continuity in Law No. 55-A/2012, the provision not having, as seen, undergone any alterations.

In these terms it is necessary to conclude that, ineluctably, cooperatives are subject to and not exempt from Item 28 GTST.

This provision regarding scope of application (objective) does not aim at documents or operations, rather, contrary to the philosophy of the Code, is concerned with taxing static "legal situations," with the tax applying to the patrimonial value of immovables, entirely similar to the RETC, but without the revenue obtained reverting in favor of the municipalities.

This closer alignment with the principles and rules present in the RETC causes the legislator to refer to it when Item 28 is at issue.

This proximity is all the more evident when one observes that the addition of Article 7(6) of the STC, by virtue of Article 3 of Law 55-A/2012, prescribes that: "The exemptions provided for in Article 44 of the Tax Benefits Statute are still applicable to the situations provided for in item No. 28 of the General Table" - a provision that enumerates exemptions in the realm of real estate tax (IMI).

This legal regime specially created in its own economic context justifies that the legislator deviated from the principles governing the STC and created a unique solution, which is foreseen with temporary character, closer to the philosophy present in the RETC.

From this specificity resulted that, regarding the exemption provided for in Article 66-A(12) of the TBS - "acts, contracts, documents, titles and other facts, including gratuitous transfers of assets" – the legislator did not proceed in the same manner as it did regarding the alteration of the wording effected in Article 1 STC, where it added to "acts, contracts, documents, titles, papers and other facts" the concept of "legal situations," nor did it expressly provide in Article 7 of the STC for the application of the exemption and consequent exclusion of the scope of application of Item 28 GTST to the realities enunciated in Article 66-A, as an example of what it did with Article 44 of the TBS.

Thus, from the foregoing it is necessary to conclude that cooperatives are subject to and not exempt from stamp tax of item 28 of the GTST.

As to the question of non-application of the provision regarding scope of application to land for construction, due to absence of "residential use":

In the absence of any definition regarding the concepts of urban property, land for construction and residential use, in the realm of stamp tax, one must resort to the RETC in search of a definition that permits assessment of any subjection to stamp tax, in accordance with what is provided for in Article 67(2) of the STC in the wording given by Law No. 55-A/2012, of 29 October.

Pursuant to the referred to legal provision, to matters not regulated in the Code, pertaining to item 28.1 of the GTST the provisions of the RETC apply subsidiarily.

Article 2(1) of the RETC provides that "property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or resting therein, with character of permanence, insofar as it forms part of the patrimony of a natural or legal person and, in normal circumstances has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of a patrimony other than or does not have patrimonial nature."

Now, in accordance with Article 6(1) of the RETC, urban properties are divided into residential properties, commercial properties, industrial properties or for services, land for construction and others.

For its part, the classification of residential properties, commercial properties, industrial properties or for services is dependent on its licensing, or, in the absence thereof, on its normal destination for the purpose in question and not on its use (cf. Article 6(2) of the RETC).

That provision provides, regarding the species of urban properties existing - integrating in this concept land for construction - that these are: "land situated inside or outside an urban agglomeration, for which a license or authorization has been granted, prior communication admitted or favorable prior information issued for a subdivision or construction operation, and also those which have been so in the acquisition title, excepting land in which the competent entities forbid any of those operations…"

The notion of use of urban property is found in the part relating to the valuation of immovables, which is well understood because the valuation of the immovable (purpose) incorporates value to the immovable, constituting a determining fact of distinction (coefficient) for purposes of valuation.

As results from the expression "…value of authorized buildings," contained in Article 45(2) of the RETC, the legislator opted to determine the application of the methodology of valuation of properties in general to the valuation of land for construction, being therefore applicable to them the use coefficient provided for in Article 41 of the RETC.

Contrary to what the Claimant proposes, the AT understands that the concept of "properties with residential use," for purposes of what is provided for in item 28.1 of the GTST, comprises both built properties and land for construction, beginning with the literal element of the provision.

In the valuation of land for construction, account must necessarily be taken of the authorized construction area and the use to be given to that construction, that is, the characteristics of the urban property that will be constructed therein.

The determination of the patrimonial tax value of land for construction has as its prerequisite the determination of the value of authorized or foreseeable buildings, for which, pursuant to Article 38 of the RETC, account must be taken of the use of those same buildings. Given that the application of the use coefficient is clear for purposes of determining the patrimonial tax value of land for construction, it is symptomatic that its consideration for purposes of application of item 28.1 of the GTST (in the prior wording) cannot be ignored.

Finally, and because in the present proceedings assessments for the year 2013 and the year 2014 are at issue, the AT further states that "although this has always been the understanding of the AT, and on which no doubts should subsist, as to the 2014 assessments, nor can any interpretative question of the letter of the Law be brought to bear, a question that, in the view of the AT and in light of all the foregoing, does not exist either for assessments prior to the year 2014, inasmuch as, with Law No. 83-C/2013 of 31-12-2013, the letter of that provision was altered expressly including land for construction as an element of objective scope of application of the provision."

In light of what has been alleged by the parties, it is necessary to decide.

II. ON THE EXCEPTION OF UNTIMELINESS

The Claimant asks this tribunal to declare the illegality and consequent annulment of the acts of assessment of stamp tax that it identifies in the opening of its petition. One of them - assessment No. 2013/…, in the amount of € 11,015.80, relating to the year 2013 and to the property with matriculation article … of the parish of … and article … of the current Union of Parishes of … (… and …) of the same municipality -, was the subject of an administrative complaint, and, that having been denied, of an administrative appeal, which was also denied through a decision notified to the Claimant on 05.03.2015.

The Claimant does not ask for declaration of illegality of the final act of denial (of the administrative appeal), limiting the object of the proceedings to the assessment acts.

The request for arbitral pronouncement was filed on 17.03.2015. Therefore, if the 90-day period provided for in Article 10(1), paragraph a) of the LRTA is counted from the denial of the administrative appeal, the request for arbitral pronouncement is timely; if, on the other hand, it is counted from the end of the period for voluntary payment of the assessment[1], the same is untimely.

In the concrete case, it is verified that the Claimant identifies as the object of the request for arbitral pronouncement the act of self-assessment of stamp tax for the fiscal year 2013. In the text of the petition, the Claimant explains that it filed an administrative complaint of that act, that administrative complaint having been denied, and, because of that, it further filed an administrative appeal, which was the subject of a filing away. However, the Claimant does not include the act of denial in the request. At the meeting that took place pursuant to Article 18 of the LRTA, the Claimant set forth its understanding that the submission of an administrative means of reaction against the illegality of the assessment act suspends the period for judicial challenge thereof, pursuant to Article 59(4) of the Code of Administrative Court Procedure (CACP), which provides that "The use of means of administrative challenge suspends the period for contentious challenge of the administrative act, which resumes its course only with notification of the decision rendered on the administrative challenge or with the expiration of its legal period." Therefore, the Claimant counted the period for submission of the request for arbitral pronouncement from the decision denying the administrative appeal. The question is whether, in order to be able to do so, it did not have to have included the act of denial of the administrative appeal in the object of the request for declaration of illegality that it formulates to this tribunal.

After the meeting of Article 18 of the LRTA was held, the AT came to request the joining of an arbitral decision rendered in case No. 346/2015-T, which, as to the exception of untimeliness of the request for arbitral pronouncement - there declared wholly founded - because, in its view, the same "presents factual circumstances entirely similar to those now under discussion. In these terms, this Tribunal should also, in consonance with the decision now joined, judge it wholly founded."

Having consulted the said decision, it is found, however, that what was at issue there was a different question from that which is discussed in the present proceedings, inasmuch as, in that case, the Claimant had filed an administrative appeal of the tax debts in which the assessment act was subdivided (identified by the collection documents), which are not autonomously annullable, whereas the request for arbitral pronouncement translated into a direct challenge of the assessment act itself considered, whereby the 90-day period should, in that situation and according to the tribunal, be counted from the end of its respective period for voluntary payment. That was the ground invoked by the tribunal for considering the exception of untimeliness invoked by the Respondent to be founded. It is not, therefore, an identical situation to that which is at issue in the present proceedings, in which the assessment act was administratively challenged and in which the request for arbitral pronouncement intends also the annulment of that assessment act. What is at issue in the present proceedings is whether the fact that the Claimant did not directly invoke the counting of the period for submission of the request for arbitral pronouncement from the denial of the administrative appeal automatically determines the untimeliness of the request, although the same was submitted within the 90-day period counted from the date on which it was notified of the decision rendered in that administrative proceeding. Let us see, then.

The act performed by the AT regarding the administrative appeal filed by the Claimant was a filing away order – the AT considered that the assessment act in question had already been the subject of pronouncement and decision in another administrative appeal proceeding and, therefore, ordered the filing away for lack of utility pursuant to Article 112 of the Administrative Procedure Code (APC).

Thus, the final act of the AT in the administrative proceeding for challenge of the tax act refers to a decision rendered in another proceeding, because the AT considers that it has no duty to decide a question that it had already analyzed and decided in another context. However, notwithstanding not pronouncing itself concretely on the assessment act, the final act of the AT is an act that confirms the assessment act, albeit by referral to a decision rendered in another proceeding.

It is therefore necessary to know whether the tribunal should consider the request untimely merely because the Claimant did not include the act of denial of the administrative appeal in its respective object.

The Tribunal understands that the analysis of this question should be guided by the principles of effective judicial protection (Article 268(4) of the Constitution) and the anti-formalist, "pro actione" and "in dubio pro favoritate instanciae" principles, which govern the provision of Article 7 of the CACP and which impose an interpretation that presents itself as most favorable to access to law and effective judicial protection, favoring the consideration of the merits of the questions. Now, taking into account these principles, the tribunal understands that the exception of untimeliness should not proceed, inasmuch as, materially, the request is timely, despite the fact that, formally, the Claimant did not include in the object of its petition the declaration of illegality of the decision of the administrative appeal. Note that, as regards this, that decision merely confirms the assessment act, whereby the invalidity of the latter will determine the invalidity of the former. Thus, it appears to this tribunal that it would be disproportionate, as overly formalistic, to consider the request for arbitral pronouncement untimely, thus preventing the consideration of the merits of the question underlying it, solely on the basis of the absence of the act of denial of the administrative appeal from the object of the proceedings.

We shall therefore proceed to the consideration of the merits of the request.

III. CLEARING OF PROCEDURAL DEFECTS

  1. The Tribunal is competent and is regularly constituted, pursuant to Articles 2(1), paragraph a), 5 and 6, all of the LRTA.

  2. The parties have legal standing and capacity, are legitimate and are legally represented, pursuant to Articles 4 and 10 of the LRTA and Article 1 of Ordinance No. 112-A/2011, of 22 March.

  3. The proceedings do not suffer from defects that would invalidate it.

IV. MATTERS OF FACT

Before undertaking the consideration of the questions of law, it is necessary to present the factual matters relevant to their understanding and decision, which, having examined the documentary evidence and the administrative file (AF) joined to the proceedings and having also taken into account the facts alleged, is established as follows:

IV.1. Proven Facts

a. The Claimant has the legal nature of a cooperative and has as its main purpose the construction, promotion and acquisition of dwellings for the housing of its members; it should also promote other initiatives of interest to its members in the social, cultural, material and quality of life domains; additionally, it may organize with its members savings-credit schemes and technical support services.

b. The Claimant is the holder of the right of superficies over the land for construction located in …, in …, registered in the land register of that parish under article …, with patrimonial tax value of € 2,126,252.50.

c. The Claimant is the full owner of the land for construction located in …, Lot …, registered in the Union of Parishes of … (… and …) with article …, with patrimonial tax value of € 1,101,580.00.

d. The AT issued two assessments of stamp tax relating to the property with article … of the Union of Parishes of … (… and …), the first relating to the year 2013 in the amount of € 11,015.80, the second relating to the year 2014 in the amount of € 11,594.13.

e. The AT further issued an assessment of stamp tax relating to the property with article … of the parish and municipality of …, relating to the year 2014, in the amount of € 21,740.93.

f. The Claimant filed an administrative complaint of assessment No. 2013/…, in the amount of € 11,015.80, which was the subject of denial.

g. The Claimant filed an administrative appeal of that denial decision, which was also denied through an order notified to it on 05.03.2015.

IV.2. Unproven Facts

There are no facts relevant to the decision that have been given as unproven.

V. THEMA DECIDENDUM

The questions to be decided in the scope of the present proceedings are two:

(i) On one hand, whether cooperatives, particularly housing cooperatives, are exempt from stamp tax provided for in item 28.1 of the GTST;

(ii) On the other hand, whether land for construction is encompassed by the provision regarding scope of application contained in the original version of Law No. 55-A/2012, of 29 October.

VI. LEGAL REASONING

The first question that needs to be decided in the present proceedings is whether the exemption from stamp tax generically applicable to cooperatives pursuant to Article 66-A(12) of the TBS encompasses the stamp tax provided for in item 28.1 of the GTST.

The referred to provision – which precedes the creation of item 28.1 of the GTST – provides that "Cooperatives are exempt from stamp tax on acts, contracts, documents, titles and other facts, including gratuitous transfers of assets, when such tax is their charge."

The exemption provision transcribed above is included in a legal provision with the heading "cooperatives," contained in Chapter XI – Benefits to cooperatives - of the TBS. Within the scope of that legal provision other exemptions applicable to cooperatives are provided for, particularly regarding corporate income tax, transfer tax and real estate tax. Generically, one can say that the major categories of tax charges that would abstractly be borne by a cooperative are, in concrete terms, excluded by the exemption provisions contemplated in Article 66-A of the TBS, which was introduced in the TBS by Article 145 of Law No. 64-B/2011, of 30 December, whose Article 147 repealed Law No. 85/98, of 16 December, which had created the Cooperative Tax Statute. This legislative choice did not represent merely the transposition of the tax regime provided for in the Cooperative Tax Statute to Article 66-A of the Tax Benefits Statute, but also an actual revision of the tax supports previously provided for the cooperative sector, both regarding corporate income tax and personal income tax, as well as regarding real estate tax, transfer tax and stamp tax, as well as regarding value added tax. On the other hand, the equation, for tax purposes, of cooperatives to legal entities of public utility and to Private Institutions of Social Solidarity ceased (which was contained in Article 20(3) of the Cooperative Tax Statute).

The revision of the regime of tax benefits to cooperatives occurred already during the period of validity of the Economic and Financial Assistance Program (EFAP) and was inserted, therefore, in a set of tax reforms aimed at the elimination of special taxation regimes and exemption regimes. Thus, we can advance with some confidence that what remained of the Cooperative Tax Statute in the TBS was the hard core of tax benefits to cooperatives, that is, those without which the regime of more favorable taxation of these entities would cease to have meaning. With respect to stamp tax, Article 66-A of the TBS exempts cooperatives in a generic manner, establishing that they are exempt from stamp tax on acts, contracts, documents, titles and other facts, including gratuitous transfers of assets, when such tax is their charge. We have no doubt that it was intended, with that provision, that cooperatives would be exempt from this tax in all facts subject to taxation in the realm of stamp tax in which they had involvement - precisely because, as the AT refers, the passage from the Cooperative Tax Statute to the TBS represented, in the matter of stamp tax, an expansion of the categories of situations encompassed by the exemption.

The alteration of the tax regime of cooperatives occurred in Law No. 64-B/2011, of 30 December, which approved the State Budget for 2012. In turn, the introduction of item 28.1 of the GTST occurred through Law No. 55-A/2012, of 29 October – a law approved, published and which entered into effect less than a year after the transposition of the regime of tax benefits to cooperatives from the Cooperative Tax Statute to the TBS, which operated the revision (and, in some matters, reduction) to which we have already referred above.

This temporal proximity, as well as the fact that both legislative alterations took place already during the validity of the Economic and Financial Assistance Program, is, in our view, relevant to the analysis being conducted. Indeed, we understand that it would not make sense for the legislator, who, through Article 66-A of the TBS, exempted cooperatives from stamp tax in all situations in which this tax could be their charge, less than a year later to make them tax subjects in a specific situation such as that provided for in item 28.1 of the GTST.

The AT argues that the fact that a number 6 was introduced in Article 7 of the STC in which it is provided that "the exemptions provided for in Article 44 of the Tax Benefits Statute are still applicable to the situations provided for in item No. 28 of the General Table" – without reference having been made to Article 66-A of the TBS - means that the legislator only intended to exempt from taxation in that respect the entities referred to in Article 44 of the TBS and not cooperatives. We do not understand it this way. In fact, it appears to us, to the contrary, that the legislator did not feel the need to repeat, in the STC, what already resulted from the generic exemption provision provided for in Article 66-A(12) of the TBS. In the same manner, it does not seem to us to be decisive to the situation sub judice that Article 1(1) of the STC had been altered so as to contemplate the expression "legal situations" and that Article 66-A(12) had not been altered so as to also integrate that expression. From this we do not draw the conclusion sought by the AT that the taxation provided for in item 28.1 of the GTST, applying to a "legal situation," would not be excluded by the provision of Article 66-A(12) of the TBS, because this does not refer to 'legal situations'. In our understanding, the taxation of immovables provided for in item 28.1 of the GTST applies to a fact subject to taxation corresponding to the ownership of an immovable with certain characteristics on the date relevant for taxation. Indeed, it is also the way in which the legislator of Law No. 55-A/2012, of 29 October, refers to it in paragraph a) of Article 6(1) when it establishes that, in 2012, "the taxable fact occurs on 31 October 2012."

On the other hand, it does not seem to us that it would make logical sense to apply a taxation exemption to all entities provided for in Article 44 of the TBS – foreign States, social security and pension institutions, associations or organizations of any religion or worship to which legal personality is recognized, trade union associations and associations of farmers, merchants, industrialists and independent professionals, legal entities of administrative public utility and those of mere public utility, private institutions of social solidarity and legal entities legally equated to them, entities licensed or that will be licensed to operate within the institutional framework of the Free Zone of Madeira and the Free Zone of the island of Santa Maria, private educational establishments integrated into the educational system, sports associations and legally constituted youth associations, companies with exclusively public capital, cultural and recreation collectives, non-governmental organizations and other types of non-profit associations, to whom public utility has been recognized, public business entities responsible for the public school network – and exclude from that exemption cooperatives, which benefit from a privileged tax status. Thus, we reiterate, it seems to us that it will have been the understanding of the legislator of Law No. 55-A/2012, of 29 October, that cooperatives already benefited from a generic exemption from stamp tax pursuant to the provision of Article 66-A of the TBS which permitted their exemption from the taxation created by item 28.1 of the GTST without need to autonomously provide for the same exemption within the STC.

In this manner, and in conclusion, we understand that the exemption provided for in Article 66-A(12) of the TBS encompasses the taxation provided for in item 28.1 of the GTST inasmuch as it is a question of taxation of a legal fact consisting of the ownership of a real right over an immovable with certain characteristics on the date relevant – 31 December of each year[2] - and that Article 66-A(12) exempts cooperatives from "stamp tax on acts, contracts, documents, titles and other facts, including gratuitous transfers of assets, when such tax is their charge."

Thus, we understand that the Claimant is correct when it invokes the illegality of the acts of taxation challenged by reason of violation of the provision of Article 66-A(12) of the TBS.

In this manner, the analysis of the remaining arguments becomes moot, namely those referring to the question of whether or not land for construction is taxed within the scope of item 28.1 of the GTST – a question that, moreover, has already been the subject of extensive jurisprudence on the part of arbitral tribunals before CAAD.

VII. DECISION

In conformity with what is set forth above, the decision is as follows:

(i) The request for arbitral pronouncement is judged to be well-founded and, in consequence, the illegality of the stamp tax assessments challenged is declared, with the consequent annulment of those same assessments;

(ii) The Respondent is condemned to pay the costs of the proceedings.

Value: in conformity with the provision of Article 315(2) of the Code of Civil Procedure, combined with Article 97-A(1), paragraph a) of the Tax Procedure and Process Code and with Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 44,350.86.

Costs: pursuant to the provision of Article 22(4) of the LRTA and pursuant to Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 2,142.00, to be borne entirely by the Respondent pursuant to Articles 12(2) and 22(4), both of the LRTA, and Article 4(4) of the cited Regulation.

Let it be recorded and notified.

Lisbon, 3 November 2015

The Arbitrator,

Raquel Franco

[1] Note that only the assessment act relating to 2013 is at issue inasmuch as the acts relating to 2014 had as their deadline for voluntary payment the end of the month of April 2015, and therefore, as to those, the question of timeliness does not arise.

[2] Except in 2012, in which the taxable fact occurred, by indication of Law No. 55-A/2012 itself, on 31 October 2012.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS apply to building land (terrenos para construção)?
The legal interpretation of whether Stamp Tax under Verba 28.1 of the TGIS applies to building land (terrenos para construção) depends on the wording of the provision in effect at the relevant time. The taxpayer argued that Law 55-A/2012 of 29 October specifically referred to 'properties with residential use' under Verba 28.1, and that building land should not be classified as such. Article 6 of the Real Estate Tax Code (CIMI) establishes a clear distinction between urban properties with residential use and land for construction, supporting the argument that these are separate categories for tax purposes. The classification of real estate under the property tax regime (IMI) is relevant for determining the scope of Verba 28.1 TGIS application.
Can taxpayers challenge Stamp Tax assessments on building land through CAAD tax arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on building land through CAAD (Centro de Arbitragem Administrativa) tax arbitration. The Legal Regime of Tax Arbitration (LRTA - Decree-Law 10/2011 of 20 January) provides the framework for arbitral challenges to tax assessments. However, strict procedural deadlines apply: Article 10 LRTA establishes a 90-day period for filing arbitration requests concerning assessment acts, counted from the day following the end of the voluntary payment period per Article 102 TPPC. In this case, the tribunal was constituted on 12 August 2015 following the request filed on 17 March 2015, demonstrating that CAAD is an accessible forum for contesting Stamp Tax liquidations, provided timing requirements are met.
What are the legal grounds for contesting Verba 28.1 TGIS liquidation acts on real estate?
The legal grounds for contesting Verba 28.1 TGIS assessments on real estate include: (1) Subjective exemptions - arguing that the taxpayer qualifies for exemption under specific provisions such as Article 66-A TBS for cooperatives, which grants exemption from stamp tax on all acts, contracts, documents and titles; (2) Scope of taxation - contending that the taxed property does not fall within the taxable category defined by Verba 28.1, such as arguing that building land is not a 'property with residential use' as required by the law's wording; (3) Interpretation of exemption provisions - arguing that Article 7(6) of the Stamp Tax Code, which references Article 44 TBS exemptions, does not exclude other statutory exemptions; and (4) Constitutional principles - invoking constitutional mandates such as Articles 85(1) and (2) of the Portuguese Constitution that require stimulation and support of cooperative activities through tax benefits.
How does the CAAD arbitral tribunal process work for Stamp Tax disputes in Portugal?
The CAAD arbitral tribunal process for Stamp Tax disputes follows these stages: (1) Filing - the taxpayer submits a request for constitution of an arbitral tribunal per Articles 2 and 10 of Decree-Law 10/2011 (LRTA), identifying the contested tax acts; (2) Acceptance and notification - CAAD's President accepts the request and notifies the Tax Authority (AT), which occurred on 15 June 2015 in this case; (3) Arbitrator appointment - the Deontological Council appoints an arbitrator under Article 6(2)(a) and Article 11(1)(b) LRTA, with parties having the right to refuse the appointment per Articles 6-7 of the Deontological Code; (4) Constitution - the tribunal is formally constituted, which occurred on 12 August 2015 here; (5) Hearing - Article 18 LRTA provides for a procedural meeting where parties may respond to exceptions and discuss procedural matters like written arguments; and (6) Decision - the arbitrator issues a decision within the established timeframe. The entire process from filing to scheduled decision took approximately 8 months in this case.
What was the outcome of CAAD arbitration process 357/2015-T regarding Stamp Tax on building land?
The provided document does not include the complete arbitral decision or outcome of process 357/2015-T. The excerpt ends during the Tax Authority's presentation of a procedural exception regarding the timeliness of the 2013 assessment challenge, arguing that the 90-day deadline had expired since the voluntary payment deadline was 30 November 2013 and the arbitration request was filed on 4 June 2015. The document indicates that a hearing was held on 15 October 2015 where the claimant responded to the AT's exception and parties waived written arguments, with the decision scheduled for 16 November 2015. To determine the actual outcome regarding whether the cooperative's exemption claim was accepted, whether the building land classification argument succeeded, and whether the timeliness exception was sustained, the complete arbitral decision would need to be consulted.